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Notices Under Construction Contracts Served By Email

March 2017 - Issue 91

Two of the four judgements issued so far in 2017 by the Technology and Construction Court have provided guidance for those drafting construction contracts, in particular on issues relating to notices. In Surrey and Sussex Healthcare NHS Trust v Logan Construction (South East) Limited [2017] EWHC 17 (TCC) Mr Alexander Nissen QC considered the validity of an Interim Payment Notice sent among various attachments in an email. For Mrs Justice O’Farrell DBE in Kersfield Developments (Bridge Road) Limited v Bray and Slaughter Limited [2017] EWCH 15 (TCC), it was timing that was the key issue.

Recent Findings

In Surrey, the Trust submitted that the email in question failed to draw the recipient’s attention sufficiently to the Interim Payment Notice that was included amongst the attachments. Conversely, the contractor held that not only was the file name of the attachment sufficiently clear but the document itself, once opened, made clear on its face that it was an Interim Payment Notice.

The Court considered whether the notice was in “substance, form and intent” an Interim Payment Notice (in accordance with the provisions of the contract), whilst also considering the contractual and factual setting.

The Court found that Logan’s notice was clear in substance, form and intent. The fact that the covering email had failed expressly to draw the recipient’s attention to the nature of the attachment was not in itself a bar – in the contractual setting the Trust should have been aware that Logan was entitled to issue such a notice and both the file name and indication on the face of the document (once opened) were sufficiently clear.

In Kersfield, one of the issues before the TCC was the question of the timing of service of a pay less notice. The notice in question was sent by email at 9.50pm on a Friday. The relevant contract clause stated:

“Any notice, certificate or other communication (notice) to be given under Section 4 (Payment) may, in addition to any other permitted method of service, be delivered by hand or sent electronically to the email-address of the addressee, provided, if sent by email and not delivered by hand, a copy is sent on the same day to the addressee by pre-paid first class post. Any notice served in accordance with this clause 1.7.3A takes effect as being given and served:

(a) If delivered by hand or sent by email by 4pm on a Business Day, on that day;

but otherwise

(b) On the next Business Day.”

The key issue here was that the employer’s email was deemed to have been served on the next Business Day which consequently meant that it was after the deadline for a valid pay less notice. This left them obliged to pay the contractor in excess of £1.1 million, in conjunction with the Court’s decision on the other matters in question.

Lessons to be Learnt

The issues in Surrey could have been avoided had the sender been clearer about the nature of the attachment to the email. During the final accounting stage a high volume of emails will be exchanged, so it benefits both parties to ensure that emails and attachments are clearly labelled. Whilst it could be argued that it may benefit the notifying party if the recipient fails to understand its significance, it is fair to assume that a contractor’s main objective is to be paid in full and on time. Thus it would be beneficial for the contractor to ensure that the employer understands when a payment application/notice is being served. If properly incorporated into the contract, contractual documents could be used to clarify requirements for emails, for example, that any notice relating to payment must clearly identify its purpose in the subject line and be sent separately to any other communication relating to the project.

In Kersfield, the drafting in the notice clause was extremely useful as it provided the parties with certainty – any emails sent after 4pm on a Business Day were deemed served on the following Business Day. It is worth noting that the clause also required a copy to be sent by pre-paid first class post on the same day. The Court did not consider any issues relating to the ‘back up’ pre-paid first class post copy (presumably because if the email was out of time then so too was any post copy). However, note that had the email been sent at 3.50pm on Friday but the sender had failed to also send a copy in the post, arguably they would not have complied with the notice clause. It is thus commonplace to add an obligation to follow up emails with a hard copy in bespoke construction contracts and amendments to the standard forms where service by email is allowed, but parties should be aware of the potential for the drafting to frustrate the intended benefit of the speed and convenience of email.

If you need any help with drafting or amending construction contracts, contact one of our team today.